This is a blog about the future of digital media law from Laurence Kaye. Laurence runs Laurence Kaye Consulting Limited (click here), bringing insight an clarity to the complexities of the digital world.

June 09, 2013

You'll recall that Professor Hargreaves' Review recommended two areas for change - copyright licensing and copyright exceptions. On licensing, there are the proposed schemes for orphan works licensing and extended collective licensing (ECL), the framework for which is in the Enterprise & Regulatory Reform Act 2013. This isn't likely to be before 2014. The Govermnent has published a FactSheet here.

But the process of overhauling copyright exceptions in the UK's Copyright, Designs & Patents Act, which started with implementation of the EC Copyright Directive of 2000, temporarily gathered - then lost - momentum with the 2006 Gowers Review, re-started with the 2011 Hargreaves Review is now once again on the move. On June 7, the IPO published the first pieces of draft secondary legislation for technical review until July 17 - not long!. They deal with exceptions for private copying, parody, quotation and public administration. The draft legislation can be found here. Draft legislation for the remaining exceptions will follow shortly.

In 'Modernising Copyright', its response to the Hargreaves Review, the Government accepted Hargreaves' proposals to update copyright exceptions in nine areas - private copying, education, quotation, text and data mining, parody, research and private study, disabilities, preservation and public administration and reporting.

Whilst updating certain copyright exceptions may make sense, the devil is in the detail. What makes the stakes so high is that the 'digital shift' means a move from the sale of physical product, including creative content on fixed digital media like DVSs, to the grant of a licence. There is no exchange of physical goods in a streamed or rental service. So great care has to to be taken to avoid the law of unintended consequences with copyright exceptions because they remove the need for a licence to do the things they cover.

I've got the following immediate reactions to the drafts.

My first comment arises from the piecemeal publication of the draft legislation. It's clear that the Government wants to avoid a 'domino' effect i.e. if the Government published all the changes in a single statutory instrument, all of them could fall if the consultation shows that they got the drafting wrong on just one. So they're dealing with each exception on a case by case basis, each with their own statutory instrument. That approach is understandable. But that makes the consultation really difficult if they're not all published at the same time. For instance, to get the full picture, I want to have the proposed changes for research and private study, quotation text and data mining and parody 'side by side' so that I can see their combined effect.

My second comment relates to the issue of 'contract override'. The proposed exceptions for parody, private copying and quotations all contain a provision which would make unenforceable any provision in a contract which purported to prevent or restrict the doing of something which is permitted under the exception. On the face of it, it is a reasonable proposition to say that if a particular use of a copyright work is permitted under an exception, a term in a contract (e.g. between a content provider and a user), should not be able to take away from the consumer what the law has said that he or she may lawfully do.

But beware the law of unintended consequences. Take the proposed new exception which will allow use of a quotation from a work providing (amongst other conditions) it is 'fair dealing'. This exception is not a binary "yes it's ok" "no it isn't" choice. Fair dealing imports tests about the extent of use that's been made, whether it's for a rival or competitive purpose and about proportionality. So a contract term won't be written to say "you - the user - can't use quotations" but it is likely to set out what the provider regards as reasonable and what is not. So this 'contract override' does not create contractual certainty. If anything, it muddies the water. And does it really give the user/consumer added protection? I'm not sure that it does. I think the practical solution, which is one that I think industry shares, is to develop the right licensing solutions which accomodate exceptions i.e. are 'exceptions +'. So I'm not convinced on this change.

My third point relates to 'lawful copies'. The notion that the exercise of copyright exceptions applies only to copies etc. of works which are lawful copies is sometimes expressly referred to in existing UK copyright law and otherwise may be implied. So the proposed exceptions for private copying and quotation, although not parody for some reason, both introduce the notion of 'lawful'. So the private copying exception allows the consumer for non-commercial purposes to make a further copy for their private use provided it was "lawfully acquired". The proposed exception for quotation only applies to works already "lawfully" made available to the public.

However, as the recent referal to the European Court of Justice by the UK Supreme Court in the Meltwater case showed - see my blog post here - there is still legal uncertainty about what constitutes a legal copy in the online world. That is deeply troubling if we're about to introduce further exceptions and needs urgent clarification.

Copyright exceptions may need to reflect the realities of digital life. But the devil is in the detail. In a world in which our creative industries are one of the few in which we are world leaders, and where increasingly the transaction between provider and consumer is a licence not a sale of goods, the stakes are high here. We cannot afford to rush the process of amending the law. If we do, and make mistakes along the way, in the long run the losers will be consumers and users as well as creators and distributors. The only ones laughing will be those in whose interests it is to have a weakened UK copyright framework.

The copyright world is hotting up. The Government has just published the first batch of draft legislation to change copyright exceptions for private copying, parody, quotation andpublic administration. You can find details here and I'll be doing a post in the next day or so.

Meanwhile, I've been meaning to do a post about Kindle Worlds, which is important both as regards fan fiction and, more generally, about the world of derivative works.

Fan fiction - new stories inspired by popular books, shows, movies, comics, music, and games - isn’t new. The worldwide publishing phenomenon ‘Fifty Shades of Grey’, by English author EL James, started life as fan fiction and features the main characters from the ‘Twilight’ books.

So Amazon’s recently announced ‘Kindle Worlds’, its new fan fiction platform, is capitalising on a well-established genre rather than inventing a new one. Amazon have started by doing a deal withAlloy Entertainment, Warner Bros’ book packaging division, covering three book/TV series crossovers, ‘Gossip Girl’, ‘The Vampire Diaries’ and ‘Pretty Little Liars’. The deal enables Amazon to licence fanfic authors to write new stories based on the characters and themes featured in the ‘Worlds’ created by the authors of the original works. Other World licensors will be added. Fanfic authors get 35% of net revenues, after royalties are paid to the World licensors, from Kindle sales.

In Kindle Worlds, Amazon Publishing stands as publisher at the centre of the fanfic universe. It takes licenses from the authors or other rights owners of the ‘Worlds’. Whilst World licensors no doubt retain the underlying copyrights and trademarks, Amazon gets worldwide publication rights inthe new fanfic works via an exclusive licence from fanfic authors over thestory and new elements they create. I would guess that rights in those newelements accrue back to the World licensors, subject to Amazon as publisher being able to license them to other fanfic others to create new works. That way, the ‘Worlds’ continue to grow.

I think ‘Kindle Worlds’ is important for at least three reasons. First, it’s a further advance by Amazon into the publishing world and demonstrates how it’s able to leverage its technical platforms and ‘end to end’supply chain from author to platform to consumer device to create additional revenue streams. No wonder that at one of the publishing industry spectrummajor players in the publishing industry are thinking hard about merger inorder to gain scale and at the other end niche players are looking at creating vertical sectors in which they compete through specialisation.

Second, whilst fanfic will continue outside Amazon’swalled garden with its proprietary technology, Kindle Worlds will also see that garden grow. For many consumers that’s great and the convenience of the ‘one click’ experience with Amazon outweighs any downsides for them by being tied into the Kindle platform. But others will think hard about that and wonderwhether they want their content available on any device, any time.

Third, Kindle Worlds is a great example of how intellectual property and derivative works have moved to the heart of the publishing business model, driven by the reader/consumer. This goes well beyond fan fiction. Intellectual properties in literary works, including underlying themes, plots and characters, together with formats, brands, software and online communities,together form the heart of the publishing ecosystem. A publisher may firstpublish a story as a print or digital book, but that may soon be followed – or even preceded – with a partnership for a full or short form televisionprogramme which is broadcast or available as a ‘VOD’ services, a computer game, live event or in a variety of other formats.

In this ‘hub spoke’ world, a clear and effective IP strategy to manage rights across a range of works and multitude of platforms is not just a part of the legal function, it’s at the very heart of publishers’business models in the 21st century.